7 Things I Wish I Knew Before Doing Business in China

Many staple US companies have entered market in China, achieving major success. Amway, KFC, Johnson & Johnson, Wal-Mart and Apple – are one of a few. What have they got in common? They discovered that business development in China must be tailored to specific needs. If you plan on expanding your business to this country, studying their tactics should be your priority. I will share with you 7 strategies that made these companies accomplish a success they enjoy today.

Number 1: Fully understand the market you are about to enter

The best investment you can make at this point is your time. Did you know that each US Company did a thorough research prior to their move to China? P&G studied hair product range already available on the market. They found that while most of shampoos catered to variety of needs, none of them successfully dealt with dandruff. This was a common problem in China. Based on the discovery, P&G launched Head & Shoulders range, now recognized as go-to shampoos for fighting dandruff.

Despite a high ticket price – Head & Shoulders was 3 times the cost of other shampoos – it became a top selling brand within three years from the launch. That was just a start – P&G quickly moved on to other categories, including beauty care, laundry, pet nutrition and baby products.

Conclusion: Make market research your top priority.

Number 2: Deliver what customers need, not what you have to sell

Recognize you are entering a different market. Take KFC – they modified their offer in order to tailor it to the local taste. With a help from China business consulting they expanded their menu to 50 items (29 in United States), successively increased traffic and encouraged repeat visits. Furthermore KFC presents around 50 new products per year (some are temporary), compared to only two in USA.

Conclusion: Adapt your offer to a new market.

Number 3: Take one step at a time

KFC started small – with only 16 outlets across China. By 1999 they were opening dozens locations every year. In 2002 the expanse was even quicker. Yum! Chain entered the market in 2008, launching 500 more restaurants, including KFCs. At that point the expansion exceeded any earlier predictions. Remember, have big dreams, but when entering new market, be prepared to wait.

Conclusion: Don’t expect overnight results.

Number 4: Be open-minded: it’s survive of the fittest

Amway is my champ.

In 1998 Chinese government out-ruled direct selling. At that point, Amway had already established a Chinese presence, building a main factory there. It was suddenly faced with a dilemma: to move elsewhere or find new selling channels.

Amway picked the latter. In a subsequent decade, the company modified their proposition five times in order to follow changing guidelines. China is now their priority market, making a third of the total Amway sales.

Conclusion: Have a business plan, but revise it as you go – nothing can be set in stone.

Number 5: Work with a diverse team

All companies entering new market made sure to hire China business consultants along their own employees. That gave them an insight view on a culture, specifics and tastes of the target customer, which otherwise would be missed. This method alone contributed greatly to the success these brands are enjoying today.

Conclusion: Recognize you will never know it all.

Number 6: Be a pioneer

Early bird catches the worm. There’s no denying – US companies who succeeded with the China market entry were the first to arrive. KFC arrived to China before any other global fast food chain even considered expanding to this country. Amway is another early comer. If you want to conquer new market, you need to be there before anybody else. The proposition doesn’t have much appeal, if your product enters already crowded market place.

Conclusion: Be an innovator not a copycat.

Number 7: Treat it as a long term investment

Amway arrived in China in 1995. KFC opened the first outlet in Beijing in 1987. P&G was there early too – launching the products in 1998.

It takes time to accomplish their level of success when doing business in China. Only by executing firm strategy, deep understanding of the customers’ needs and perseverance these brands conquered difficult Chinese marketplace.

Conclusion: Be determined and patient

As we can see the US companies that thrive in China have many things in common. They began by performing a thorough research of the customer needs, entered the market with a long term goal and were prepared to alter the offering to fit new customs and China business strategy.

Is your company ready to fit the bill?

Casey W. Xiao-Morris is China Business Consultant at Leverage China, LLC, specializing in capturing China’s market opportunities for American companies. Casey can be reached at cxmorris@LeverageChina.com